IS YOUR UNPAID INTERNSHIPS LEGAL?

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Hello, Summer!  College students are now reaching out for Summer internships. You might want free labor.  But…

Is your unpaid internships legal?

Your interns may be eligible for benefits regardless of their pay status.  Each state has different regulations.  If you are not up to speed on the laws surrounding internships, we highly encourage you to pay the interns minimum wage. (In MA, this is $11.00 per hour) and to limit the number of hours they work.

Do you know the legal tests?

The Department of Labor (DOL) has a six-factor test to follow when determining unpaid internship criteria:

  1. The internship, even though it includes actual operation of the facilities of the employer, is similar to training which would be given in an educational environment;
  2. The internship experience is for the benefit of the intern;
  3. The intern does not displace regular employees, but works under close supervision of existing staff;
  4. The employer that provides the training derives no immediate advantage from the activities of the intern, and on occasion, its operations may actually be impeded;
  5. The intern is not necessarily entitled to a job at the conclusion of the internship; and
  6. The employer and the intern understand that the intern is not entitled to wages for the time spent in the internship.

If all of the factors listed above are met, an employment relationship does not exist under the FLSA, and the Act’s minimum wage and overtime provisions do not apply to the intern.  This exclusion from the definition of employment is necessarily quite narrow because the FLSA’s definition of “employ” is very broad.  Some of the most commonly discussed factors for “for-profit” private sector internship programs are considered below.

The goal is to avoid classifying interns as free labor when the work and conditions under which they work is performed is no different than an actual employee.

This law may be outdated, but the Primary Beneficiary Test is under scrutiny and appeal by the U.S. circuit courts.  Under this test, a business can gain some of the benefits from the intern, as long as the intern remains the primary beneficiary of the opportunity.

The test evaluates a set of flexible, nonexhaustive options, such as:

  • The intern and the employer understand that there is no expectation of compensation during the internship and not guarantee of a job after the internship is complete.
  • The internship provides similar training to that given in a classroom or clinical training.
  • The internship is tied the intern’s formal education through integrated coursework and the intern receives academic credits.
  • The internship is aligned with the academic calendar.
  • The intern’s work complements, rather than displaces, paid employee’s work and provides significant educational benefits to the intern.

The DOL test is still in use in many states with the exceptions of Connecticut, New York, and Vermont which are int eh 2nd Circuit and Alabama, Florida, and Georgia which are in the district courts of the 11th circuit.

We advise employers to pay interns minimum wage, limit working hours, and comply with applicable employment laws.

If your business is considering putting unpaid interns on board, this internship is subject to scrutiny by the DOL and should be coordinated with or approved by a school that offers academic credits.  Association with a school or providing college credit doesn’t make the internships legal.

Steps you can take to establish an unpaid internship:,

  •  Create a formal internship with start and stop dates
  • Keep a record of all hours worked
  • Be sure the internship is not a replacement for paid employee work
  • Set up a program for the training and supervision of the intern
  • Let the interns know in your job posting that you prefer candidates who will receive credits
  • Send an offer letter to the intern; include details that it is an unpaid internship and that you do not guarantee a job upon completion

We have successfully followed this practice over several Summers for Dube Consulting.  We can attest to the effectiveness and the quality of the candidates you will receive.  If you have additional questions, please reach out to us.

 

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